Editor’s Note: Since the beginning of 2008, people living in southern Oklahoma and across the United States have been dealing with tough money issues. This week, The Ardmoreite takes a look at how people are coping, and what are their plans for their economic future.
Most Americans consider themselves to be solidly middle class, but many report they are having trouble making ends meet as rising fuel and food costs threaten to throw their family budgets into a tailspin. To make matters worse, shrinking 401(k) accounts and falling home values make them feel even worse off.
For others, the economic downturn has even more serious consequences. A third of adults 45 and older surveyed by the American Association of Retired People said they had stopped contributing to their retirement accounts, and 14 percent reported they had cut back on their medications. A quarter of the respondents said they are having trouble making mortgage or rent payments.
Many young adults, especially those in low-paying, entry-level jobs, find it hard to make much financial progress. They often face student loan bills and credit-card debt in addition to rent, food and car payments, so there is little left over to put back in savings.
And it’s not just young people who are having trouble setting aside money for the future. The personal savings rate was above 10 percent in the early 1980s. By 2006, the savings amount was a negative 1 percent. Less than 40 percent of all American adults have an emergency savings fund to fall back on in the event of a job loss or serious illness, according to the Consumer Federation of America.
“My husband and I are able to pay our bills and for groceries and gas, but we don’t have anything left over,” Healdton resident April Jones said. “I would love to be able to save money.”
At least two out of five American workers don’t have retirement plans through their employers, according to the Investment Company Institute. Most of those workers will be almost 100 percent dependent on Social Security in their retirement years. And many of those with savings plans at work haven’t saved enough for a comfortable retirement. Nearly half of the workers surveyed by the Employee Benefits Research Council said they had less than $25,000 in total savings and investments.
More workers are drawing money from their 401(k) retirement accounts to help make ends meet. The Transamerica Center for Retirement Studies reported that the number of workers with loans outstanding on retirement accounts rose to 18 percent in 2007 from 11 percent a year earlier.
“Americans are borrowing more because incomes have failed to keep up with the cost of health care, housing and other basic needs,” according to Jose Garcia, James Lardner and Cindy Zeldin, authors of a new book, “Up to Our Eyeballs.”
To make matters worse, many Americans have gone further into debt in recent years by drawing on the equity in their homes and turning to their credit cards to help pay the bills. Credit-card debt in the U.S. has reached a record of nearly $1 trillion.
“Americans are taking on more debt as tough economic times — slowing economic activity, job losses, soaring energy and food prices, slumping home values and record home foreclosures — strain many people’s budgets,” said Associated Press economics writer Jeannine Aversa. “Revolving consumer debt, almost all from credit cards, now totals $957 billion, compared with $800 billion in 2004, according to the Federal Reserve.”
Despite a relatively strong state economy, not all Oklahomans are benefiting equally. According to the Oklahoma Policy Institute, many of the economic benefits are going to Oklahomans in the upper income brackets, leaving middle- and low-income families struggling to keep their heads above water. Bankruptcy filings for the first three months of 2008 are up almost 25 percent compared with the previous year. And the number of delinquent mortgages rose more than 50 percent between the third quarters of 2005 and 2007. Things are even worse if you are having trouble finding a job.
“Things are tight,” Tina Alexander of Ardmore said. “I’m living with my mom, and I know a lot of other people who are having to stay with their families.”
Ardmore’s economy remains relatively strong, and the region is adding jobs faster than both the state and nation, according to Oklahoma State University’s Center for Applied Economic Research. Wages and incomes are expected to increase at a 5 percent plus pace this year. But while jobs may be plentiful, they are not always high paying.
The majority of Ardmore’s family incomes range from less than $10,000 to $24,999, according to the 2000 U.S. Census. Only 12 percent of the city’s population makes more than $75,000 per year.
A slumping national economy naturally affects families in southern Oklahoma as well as in other parts of the country. And an increasing number of low- to moderate-income people are struggling to balance their household budgets and meet all their financial obligations.
“It’s terrible. Everything is so high,” Ardmore resident Geraldine Burns said. “You get a pay check and you’re broke the next day.”
Deputy Court Clerk Gina Richardson said the number of people being sued in small claims court is significantly higher this year than last. Businesses that are trying to recover unpaid balances on loans and services file claims to recoup the money.
“I have filed 140 cases this month as of Aug. 15,” she said “In January I filed 136 cases for the whole month.”
Richardson said she has filed a total of 1,126 cases so far this year in contrast to 1,501 for all of 2007.
If the economic situation worsens, it will create increased demands on those public and private programs that assist needy families and individuals.
“In addition, economic downturns create various strains on family well-being, which can lead to increased demand for intervention and services in such areas as child welfare, mental health and substance abuse, domestic violence, juvenile justice and corrections,” Oklahoma Policy Institute Director of Policy David Blatt said in his report “On the Brink.”
So how do people cope?
“I just take things one day at a time,” Burns said. “I don’t have to have the finer things in life. Whatever God wants me to have is fine with me.”
The Associated Press contributed to this report.
Friday: Private charities provide a valuable safety net for people who fall on hard times, but they are dependent on voluntary donations from others. What kind of problems are they facing as the economy struggles to right itself?
